Political tensions in Kuwait unlikely to delay oil projects

31 August 2014

Big schemes have seen progress in recent months despite heightened tensions in the country

Over recent months, the Kuwaiti political scene has been thrown into disarray by allegations that senior judges were involved in a multibillion-dollar corruption scandal, but in the short term the increase in tensions is unlikely to further delay major oil projects.

Angry reaction

In the wake of the allegations, thousands took to the streets to protest, an opposition leader was temporarily imprisoned and the prime minister and a former oil minister filed lawsuits demanding an investigation. The angry reaction has also seen Kuwait’s cabinet adopt what it describes as an “iron fist policy” against those it sees as trying to undermine the country’s stability.

Despite the drama, those involved in Kuwait’s oil sector say the climate remains relatively conducive to pushing through major projects.

Major oil and gas projects
ProjectClientStatusValue ($m)End date
Central region oil shale developmentEesti Energia/YTL Corporation/NEIStudy6,0002022
Port of Aqaba liquefied petroleum gas terminalMinistry of Energy & Mineral ResourcesExecution1,0002016
Hamza oil field redevelopmentNatural Resources AuthorityStudy8002019
Amman strategic reserve terminal for petroleum productsMinistry of Energy & Mineral ResourcesExecution4002016
Port of Aqaba liquefied natural gas terminalAqaba Development CorporationExecution1002015
For further information visit www.meed.com/meedprojects

“We’re seeing the CEOs of Kuwait Oil Company (KOC) and Kuwait National Petroleum Corporation in regular meetings. They seem bullish and are moving ahead with contracts at all costs,” says one senior diplomat. “They’ve got the urgency needed to get these projects going simply because of the cost of Kuwaiti oil and the political imperative.”

Over the past decade, several large oil projects have struggled to get off the ground due to opposition from parliament, but in recent months some of these have seen significant progress.

In April 2014, contracts were issued for $12bn-worth of work on the Clean Fuels Project to expand and upgrade the Mina al-Ahmadi and Mina Abdullah refineries. The $14bn New Refinery Project to build a refinery and port in south Kuwait has seen billions of dollars-worth of packages tendered in recent months after years of delays.

The $4.2bn Lower Fars heavy oil project is also seeing renewed momentum with KOC currently evaluating bids. The field development was originally set to take place six years ago after the US’ Exxon Mobil signed an agreement with KOC in October 2007, but the deal fell apart in the wake of the financial crisis.

Business climate

Kristian Coates Ulrichsen, an associate fellow at London-based Chatham House’s Middle East and North Africa programme, says the environment for business and government contracts is better than it has been for a long time. “Disruption from the protests hasn’t made an impact on the decision-making process on big projects. At the moment, delays are less likely as the parliament is pro-government, but this won’t last forever,” he says.

What remains to be seen is whether the current business climate will last long enough to see the New Refinery Project and Lower Fars scheme through to execution.

Minister of oil: Ali Saleh al-Omair

Key contact: Kuwait Petroleum Corporation

Tel: (+965) 1 85 85 85

Web: www.kpc.com.kw

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